The term 'employment status' is the arrangement under which an individual is engaged to work for an organisation. There are three labels: ‘employee’, ‘worker’ and ‘self-employed’. It is important to correctly label individuals who work for an organisation, as a false labelling could mean they are missing out on key employment rights they are entitled to.
Employment status is a question of fact for each employment tribunal to determine, based on the circumstances of the case in issue. They will assess the relationship between the parties, which includes looking at the level of control that an organisation extends over an individual.
The landmark case of Ready Mix Concrete v Minister of Pensions and National Insurance, explored the difference between a contract of service, which would be present in a contract of employment, and contract for services, which would be seen in self-employment. It set out three conditions to determine if an individual was an employee or self-employed:
- the person agrees to provide work in return of a wage
- the person provides express or implied willingness to be controlled
- the other terms are consistent with that of a contract of employment.
Ready Mix explained that control relates to the power of deciding the thing to be done, the way the thing should be done, the means to be employed in doing the thing and the time and place where it should be done.
This case concerned a claimant who was engaged by an organisation to take the lead on business matters. This included business development and improving overall productivity. He also provided direct advice to the organisation’s managing director, Mr Rorison, about a particular project based overseas. As part of his role, the claimant had control of the way and when work was done by him.
For his part, Mr Rorison did have final say in the operations of the business. He also dictated how and where the claimant was paid and, later on, the amounts that he was to be paid. Despite this, no contract of employment was ever established between the two parties, however a written agreement had previously been made between the two.
The relationship between the claimant and the organisation broke down and he later presented a claim to the employment tribunal (ET) for unfair dismissal, amongst others. However, before they could hear his claims, the tribunal first had to determine if he was an employee of the organisation and therefore had the lawful right to bring them.
The tribunal was not satisfied that there was the requisite degree of control exercised over the claimant by the organisation in order to label him an employee. Applying the Ready Mix principle, they held that Mr Rorison ‘did not direct what the claimant did, the way or when it was to be done’.
Although the tribunal did not intend to state that the organisation had control over all matters, in matters outside the remit of particular areas such as business development the claimant was in control of his work.
The claimant appealed on two grounds. He argued that too much emphasis had been placed on his daily control of work and not on whom ultimate control of the arrangement resided. He also put forward that the Ready Mix test was multi-factorial and failed to give sufficient weight to elements that pointed to employment.
The EAT dismissed his appeal.
In forming their decision, the EAT held that in order for there to be an implied overarching right of the control of an individual, clear evidence must be presented, which the claimant had failed to do. As a result of this, the tribunal had correctly concluded, by applying the Ready Mix test, that whilst the organisation had ultimate control over some matters, the degree of control exercised was insufficient to justify a conclusion that the claimant was an employee of the respondents.
As we see yet another case about employment status, this has an interesting outcome that has gone the way of an organisation. As usual, tribunals will look to establish the truth of the relationship by assessing the level of control placed over an individual; here, the claimant was able to choose his own work and, crucially, had not signed a contract of employment, meaning his claim failed.
Organisations should always take care that the relationship between themselves and those that work for them reflects what they originally intended. Failure in this regard could lead to costly tribunal claims.